Travis Edmondson: Yes. We’re seeing a lot of opportunity. Of course, there’s a lot of competition in that space today. A lot of other institutions are derisking their balance sheet, similar to what we’re doing. But we’re seeing a lot of opportunities. And we’ve actually grown committed balances in the C&I space by a little over $100 million last quarter. So, we continue to really engage in that space, and we’re seeing some positive momentum.
Catherine Mealor: Okay, great. And then on the deposit side, your NIM guide was really helpful and seems like we’re stabilizing, which is great. Can you just talk about just the incremental cost of deposits and just kind of what you’re seeing within the behavior of your clients, maybe one, where you’re seeing the most — maybe the most stress in terms of higher deposit costs versus where things are really starting to ease, maybe in product or kind of deposit type.
Michael Mettee: Hey Catherine, it’s Michael. I’ll start and then Travis can jump in. I mentioned public funds, most of our deposit outflows in the third quarter were down $230 million, but $300 million outflows in public funds, so that all of it centered around that. As those come back on, I mentioned 5% range, those are mostly expected to be Fed funds minus a little bit. So highly competitive, expecting full market rates, their large customers, commercial, corporate are expecting 5-plus-percent on deposits, you’re getting large balances. The challenge we face, and I know we’ve talked about this before, as you look across our footprint, tackets of banks, whether they’re community banks or smaller or some of the larger institutions, the community banks have CDs priced at 5.75% for six months, right?
And so that’s impacting our retail. And then you get the money market and stuff that’s still over 5%. What we’ve seen is because the velocity of rate increases has slowed that the constant request for repricing has moderated. And so that’s been a benefit. And as long as there’s stability, I think you continue to see that. But new deposits, new customers, they expect market rates.
Travis Edmondson: Correct. Just one quick thing to add. A lot of the people this time last year were chasing yields where they could get much higher yield, right? We’re talking from 1% to 4%. It’s been somewhat stabilized over the last few quarters, where you might go from 5.25% to 5.75%, and there’s not as many people chasing that incremental yield in the footprint. So that’s helped us a little bit.
Catherine Mealor: That’s great. Go ahead, Chris.
Chris Holmes: Yes, I want to make one — so as we look forward, as Michael said, the velocity of change has really slowed. One of the key variables for us over the next two quarters, I’d say, is public funds and that the flow in and out of public funds sometimes we see — not sometimes all the time. We see a flow out of in the second quarter, that’s a combination of the way the funds come into most of our public entities as well as some folks making a market share play for reporting purposes and then they come back in the third and fourth quarter, and those tend to be when they come back in there at higher, those are some of our highest priced. And so we’re going to manage through that in the third and fourth quarter.
Catherine Mealor: So it’s really a function of your public funds that are driving some modest but more margin pressure in the back half of the year more so than your retail and kind of core customer base? Would that be a fair comment?
Chris Holmes: That’s right. Exactly.
Operator: The next question comes from Brett Rabatin from Hovde Group. Please go ahead.
Brett Rabatin: I wanted to start off, it’s college football season. And I know you guys followed that quite a bit. And I know there’s been some desire to get FBK back in the college playoffs, so to speak. And so I wanted to ask, you’ve obviously taken some actions here in 3Q on offense and defense with the securities portfolio and the expenses. I wanted to see what else you might be considering doing to get, quote, back in the playoffs in ‘24, or if you feel like what you’ve done is kind of what you’re able to do, and if maybe up in the playoffs in ‘25 instead.
Chris Holmes: Yes. Hey Brett, this is Chris. You’re right. It is college football season, we are fans and we do have the Monday morning ribbing of everybody that’s on the losing end. So it’s no fun on Monday morning out here when you lose and it’s no fun day in and day out when you lose in banking relative to how we perform. And so, if you go back and look at our historical performance, it doesn’t just go back actually two or three years, if you go back to when we start the call, we talk about where our compound annual growth rate of the tangible book value of our stock is, since we’ve become a public company, we go back and we actually look further back than that and we’ve always been a premier performer. And we — that’s one of our key foundational tenets here is we’re going to be in a lead performer.
We did over the last I’ll say, four quarters or so, four, five quarters, said, hey, there are some things that we need to do to make sure that we have the scalability of the company and the foundations of the company where they need to be. So we spent some money, which we knew would hurt our performance. And we have taken — as we say, we took our foot off the accelerator, we’ve done some things. But we feel, hopefully, you’re beginning to hear when we talk about our confidence moving forward and when we talk about some momentum moving forward, we are — we’ll be back in the playoffs and competing for the championship. And so that’s game-on from our standpoint. Just keeping with your metaphor there, it’s game-on from our standpoint.
You saw improvement last quarter that was meaningful. You see improvement — some improvement this quarter that was meaningful. You see the steps that are already going to improve next quarter in ‘24. And so we have — we continue to generate leverage. When we talk about strengthening on our balance sheet, what we’re doing is creating levers that we can pull as we go through ‘24 to improve our profitability and make sure our returns are where we want them to be. We’re shareholders and those returns are — they have — our bar is higher than any of the investors out there. Our internal bar’s higher than any of the investors. And so, again, we appreciate the metaphor, and we are playoff caliber at this point and competing for the championship.
Brett Rabatin: That’s good to hear. It sounds like you’re expecting ‘24 to be a lot improved, so that’s good to hear. I wanted to ask back on credit. You’ve got the slide in the deck about the office portfolio. But I’m actually curious — it’s slightly smaller, but wanted to ask actually about hotels. And just if we have any kind of consumer-driven weakness in the next year, 18 months would seem like hotels might actually be somewhat at risk. And so, I was curious if you guys have done any work on RevPAR or occupancy, cushions for the hotel portfolio and maybe how you think about that book?
